Shell balance sheet takes £12.3bn hit due to IAS19

ROYAL DUTCH SHELL has reported a $19.2bn (£12.3bn) impact on its balance sheet after implementing the revised IAS19 accounting standard for its pension scheme, its latest results show.

The Anglo-Dutch oil giant restated its balance sheet from December 2012 using the revised standards. It showed a jump from a retirement benefit surplus of £4bn to a deficit of £8.3bn, Financial Director’s sister publication Professional Pensions reports. 

Previously, Shell used a corridor accounting method, which amortised the value of scheme deficits and left it off the balance sheet over a number of years.

The revised IAS19 no longer allows the corridor method and as a result the whole value of the scheme deficit had to be accounted for on the balance sheet.

For December 2012, the change reduced assets from £8bn to £1.5bn and increased liabilities from £4bn to £9.8bn.

However, over the three months to March 2013, the deficit reduced from £8.3bn to £7.4bn as assets increased to £2.2bn and liabilities fell to £9.6bn.

Although, the deficit positions is up from March 2012 where it stood at £6.7bn.

According to experts, the corridor accounting method is relatively uncommon, used by around 5-10% of FTSE100 companies due to legacy regulations adopted in Europe and the USA.

This news comes after Lloyds Banking Group reported a £2.1bn hit on its balance sheet after adopting the revised standards (PP Online, 30 April).